Primary prices over $7 billion; Organon rips on debut; Fortress, CoreCivic at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Ore., April 8 – Evidence of the buyside's ongoing ravenous appetite for new high-yield paper was plentiful on Thursday and seven issuers priced a combined total of eight dollar-denominated speculative-grade tranches to raise a hefty $7.46 billion.

Meanwhile, the secondary space was firm on Thursday with the 10-year Treasury bond yield continuing to trend lower, reducing pressure on longer-duration, low-coupon junk bonds.

New paper remained in focus following the deluge of deals that priced over Wednesday’s and Thursday’s sessions.

Organon’s newly priced dollar-denominated tranches had strong breaks with the tranches climbing 1 to 3 points above their issue prices.

Fortress Transportation and Infrastructure Investors LLC’s 5½% senior notes due 2028 (Ba3/B/BB-) and CoreCivic, Inc.’s 8¼% senior notes due 2026 (BB-) were also putting in strong performances with both issues also 2 to 3 points above issue prices.

However, Forestar Group Inc.’s 3.85% senior notes due 2026 (B1/B+) and UPC Broadband Finco BV’s 4 7/8% senior secured notes due 2031 (B1/BB-/BB+) remained on a par-handle.

Meanwhile, high-yield mutual and exchange-traded funds broke the trend of outflows with $3.809 billion entering the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Over $7 billion

Executions were tight, and in several cases posses of investors chased deals into the secondary market, with new bonds trading to substantial premiums.

For example, the substantially discounted EnVen Energy Corp. 11¾% second-lien notes due 2026 traded to 101½ bid, 102½ offered, after pricing at 98, a trader said.

News Corp. made its debut in the high-yield bond market on Thursday, pricing an upsized $1 billion issue of 3 7/8% eight-year senior notes (Ba2/BB+) at par, inside of talk.

The deal was well-received, playing to around $5 billion of demand, and traded to 101¼ bid, 102 offered, a bond trader said.

The day's biggest deal came from Organon & Co., which is being spun off from Merck. Organon priced $4.1 billion and €1.25 billion in three tight-to-talk tranches.

Both dollar-denominated tranches were heard to be heavily oversubscribed, with the unsecured tranche seeing a greater amount of demand than the secured tranche, according to a trader who added that there was strong real money support across both tranches.

Thursday's big burst of issuance left in place a substantial $3.05 billion active calendar, as a trio of issuers will attempt to clear the market ahead of the coming weekend (see related stories in this issue).

Organon rips

Organon’s dollar-denominated tranches ripped after breaking for trade on Thursday.

The 5 1/8% senior notes due 2031 climbed more than 3 points and were changing hands in the 102 5/8 to 103¼ context heading into the close, a source said.

There was more than $88 million in reported volume.

The 4 1/8% senior secured notes due 2028 did not reach the same heights as their higher yielding counterpart.

However, they were strong out of the gate and quickly traded up to a 101-handle.

The 4 1/8% notes were trading in the 101 5/8 to 101 7/8 context heading into the close, a source said.

There was more than $78 million in reported volume.

At a premium

Fortress Transportation’s 5½% senior notes due 2028 and CoreCivic’s 8¼% senior notes due 2026 were also 2 to 3 points above their issue prices.

Fortress Transportation’s 5½% notes were changing hands in the 102¾ to 103 context heading into the close, a source said.

In addition to a solid coupon, the bonds from the transportation infrastructure company were boosted by President Biden’s recently unveiled infrastructure spending program.

Fortress Transportation priced a $500 million issue of the 5½% notes at par on Wednesday.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

CoreCivic’s 8¼% senior notes due 2026 were also well above their discounted issue price.

The 8¼% notes traded as high as 103 before settling into the 102 to 102 3/8 context, a source said.

CoreCivic priced an upsized $450 million, from $400 million, issue of the 8¼% notes at 99 to yield 8½% on Wednesday.

The deal was heard to be two-times oversubscribed.

Par handle

Forestar Group’s 3.85% senior notes due 2026 saw a lackluster reception in the secondary space with the notes largely stuck at par.

They were changing hands in the par to par ¼ context on Thursday, a level the notes have remained in since breaking for trade on Wednesday.

Forestar Group priced a $400 million issue of the 3.85% notes at par on Wednesday.

Pricing came inside of yield talk in the 4% area.

While the notes were trading with a slight premium, UPC Broadband Finco BV’s 4 7/8% senior secured notes due 2031 remained on a par handle.

The notes were changing hands in the par 3/8 to par ½ context heading into the close.

UPC Broadband priced a $1.25 billion issue of the 4 7/8% notes at par on Wednesday.

Pricing came at the wide end of official talk in the 4¾% area, which was wide of the 4 5/8% to 4¾% early guidance.

Indexes

Indexes continued their upward momentum on Thursday.

The KDP High Yield Daily index gained 5 points to close Thursday at 69.59 with the yield now 3.93%.

The index rose 8 points on Wednesday, 9 points on Tuesday and 8 points on Monday.

The CDX High Yield 30 index gained 12 bps to close Thursday at 109.72.

The index climbed 4 bps on Wednesday, 6 bps on Tuesday and 15 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.